No state tax on newspapers and electricity for railways

Q.  Which of the following is/are true?

1) No tax can be imposed on the consumption or sale of electricity by the states, which is consumed in the construction, maintenance or operation of any railway by the Centre or by the concerned railway company.
2) A state legislature can impose taxes on the sale or purchase of goods (other than newspapers).
- Published on 04 Aug 16

a. Only 1
b. Only 2
c. Both 1 and 2
d. Neither 1 nor 2

ANSWER: Both 1 and 2
 
  • A state legislature can impose tax on the consumption or sale of electricity.
  • But, no tax can be imposed on the consumption or sale of electricity which is
    (a) consumed by the Centre or sold to the Centre; or
    (b) consumed in the construction, maintenance or operation of any railway by the Centre or by the concerned railway company or sold to the Centre or the railway company for the same purpose.
  • A state legislature can impose a tax in respect of any water or electricity stored, generated, consumed, distributed or sold by any authority established by Parliament for regulating or developing any inter-state river or river valley.
  • But, such a law, to be effective, should be reserved for the president’s consideration and receive his assent.

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